Posts

Why Stocks Have Rallied

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What’s in Today’s Report:

  • Why Stocks Have Rallied (FOMO)
  • An Important Gap Between Stocks and Bonds
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a quiet night as markets digest more mixed economic data following the big three day rally.

Chinese economic data was mixed as Industrial Production missed estimates (5.3% vs. (E) 5.5%) while Fixed Asset Investment slightly beat and Retail Sales met expectations.

Geo-politically it was a quiet night as there were no updates to U.S./China trade.

Today focus will be on economic data via the Jobless Claims (E: 225K), Import Export Prices (E: 0.3%, 0.2%) and New Home Sales (E: 620K), as well as testimony before Congress by Treasury Secretary Mnuchin.  Finally, there’s a GE guidance update later this morning, and if that’s particularly soft, that could hit stocks.

Tom Essaye Appeared on WPTV on March 12, 2019

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“If you think about it from a total cost stand point, eliminating the subsidized loans will hurt borrowers in so much as it will cost them more over the time of the loan,” said Tom Essaye, President of Sevens Report Research. Click here to watch the full interview.

Economic Breaker Panel: March Update

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What’s in Today’s Report:

  • What’s Next for Brexit
  • Economic Breaker Panel – March Update
  • Another (Potentially Bearish) Copper Development

Stock futures are marginally higher this morning after a very quiet night of news while no major international market moved more than 1% overnight.

Asian shares declined modestly after a report that Japanese Machine Orders fell –5.4% in January vs. (E) -1.9%.

In Europe, EU Industrial Production beat expectations (1.4% vs. E: 1.0%) while focus remains on today’s “hard Brexit” vote in the U.K. (which is very unlikely to pass).

Looking into today’s U.S. session, focus will be on economic data early with two reports due ahead of the bell: Durable Goods Orders (E: -0.8%), PPI (E: 0.2%), and one shortly after the open: Construction Spending (E: 0.3%).

There are no Fed officials speaking today so investor focus will shift to the “hard Brexit” vote but it is very unlikely to pass which will result in another vote to delay the Brexit date tomorrow. This scenario is priced in however and should not materially move markets.

Leading Indicators

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What’s in Today’s Report:

  • Some Leading Indicators of the 2018 Correction Are Teetering Again

U.S. futures are up small while Asian markets were notably higher overnight as the indexes continued to play “catch up” to the big gains in the US since mid-day Friday while EU markets are flat as investors eye today’s Brexit vote.

News that the EU made some last minute concessions to the Brexit agreement ahead of today’s vote in Parliament was seen as a positive o/n but a deal still remains unlikely.

The NFIB Small Business Optimism Index was 101.7 vs. (E) 102.5 in February but encouragingly some of the forward looking details did improve.

The two primary catalysts in the U.S. today both hit before the open with CPI (E: 0.2%) at 8:30 a.m. ET and then the Fed’s Brainard speaks at 8:45 a.m. ET. Focus will then return to today’s Brexit vote and while a “deal” is not likely, it will be the lack of a delay to the deadline that would hit the pound and risk assets globally.

ECB Preview (Why It’s Important For U.S. Stocks)

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What’s in Today’s Report:

  • ECB Preview (This is more important to U.S. stocks than it seems)
  • Jobs Report Preview

Futures are drifting slightly lower following a quiet night as markets await the ECB decision later this morning.

Economic data generally met expectations overnight as Euro Zone Q4 GDP was 1.1% vs. (E) 1.2% while Chinese FX reserves were in line at $3.09T.

Today the key event will be the ECB Decision at 7:45 a.m. ET and then the ECB Press Conference at 8:30 a.m. ET.  For this to meet dovish expectations (and not be a disappointment for stocks) we’ll need to see 1) An extension of the promise not to raise rates until 2020 and 2) A strong hint more TLTROs are coming.  This decision will have direct impacts on Treasuries and stocks (more inside the report).

Away from the ECB we also get Jobless Claims (E: 223K) and Q4 Productivity and Costs (E: 1.6%, 1.8%) plus there’s one Fed speaker:  Brainard (12:15 p.m. ET).

A Make Or Break Month Ahead

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What’s in Today’s Report:

  • Why March Will Be A Make Or Break Month For The 2019 Rally
  • The Q4 GDP Report – Why It Wasn’t As Strong As It Seemed

Futures are moderately higher thanks to strength in Asia and generally in-line economic data.

Chinese shares are up 1% because index firm MSCI announced it will increase the weighing for mainland Chinese stocks to 20% from the current 5%.

Economically, global Feb manufacturing PMIs largely met estimates as the EU number rose to 49.3 vs. (E) 49.2. while the British reading was in-line at 52.0.

Today focus will be on data as we get two important economic reports.  First, the Fed’s preferred measure of inflation, the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) is released, and that year over year number needs to stay around 2% to continue the “dovish Fed” narrative.  Later, we get the Feb. ISM Manufacturing PMI (E: 55.0) and it needs to meet expectations to help offset some of the poor data from February (retail sales, etc.).

Seven Macro Catalysts

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What’s in Today’s Report:

  • Seven “If’s” That Will Move This Market

Money flows are decidedly risk-on this morning thanks to renewed optimism about U.S.–China trade negotiations after an otherwise very quiet weekend.

Late yesterday, President Trump officially delayed the March 1st tariff deadline sending US stock futures up 10-15 points at the electronic open and shares in mainland China up over 5%.

There were no notable economic reports or other market moving catalysts overnight.

Looking into today’s Wall Street session, there are two economic reports due out this morning: Chicago Fed National Activity Index (E: 0.13) and Dallas Fed Manufacturing Survey (E: 3.0). These two releases are not usually watched closely by investors but they were especially bad in late 2019 and contributed to the heavy selling in December, so if they “whiff” again, we could see stocks come for sale.

There are no Fed officials scheduled to speak today which will leave the market primarily focused on any new developments or details regarding trade negotiations with China. Note that the March 1st deadline was delayed indefinitely and there were no other material developments regarding trade over the weekend so investors will be looking for any further indication on the next steps towards a deal.

A New Prognosis from Dr. Copper?

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What’s in Today’s Report:

  • Is  Dr. Copper’s Prognosis for the Markets Just Change?
  • Economic Data (Yesterday Was Not a Good Day)
  • Energy Update

Futures are recouping yesterday’s losses not because of what happened overnight (which was nothing) but instead of what might happen today.

Trump & Chinese Vice Premier He will meet at 2:30 ET and markets hope more progress on a deal is signaled.

Additionally, markets hope Fed officials (specifically Williams and Clarida) give more clarity on the end of QT at a Fed conference later this afternoon.

As mentioned, there are no economic reports or notable earnings today so focus will be on the Trump/He meeting and the various Fed speakers making comments today:  Williams (10:15 a.m. ET), Bullard (1:30 p.m. ET), Clarida (1:30 p.m. ET), Harker (1:30 p.m. ET).  For those events to power stocks meaningfully higher, we’ll need to see hints that a U.S./China deal would reduce current tariffs, and a clear indication that QT will end in 2019.

Technical Tipping Point

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What’s in Today’s Report:

  • Technical Update – We’ve Reached the Tipping Point
  • Why Copper Really Rallied Yesterday

Futures are slightly lower and international markets were mixed overnight as investor focus is shifting to today’s release of the January FOMC Meeting Minutes.

Japanese Exports in January were worse than feared (-8.4% vs. E: -6.1%) while the British CBI Industrial Trends Survey was 6 vs. (E) -5 but neither release moved markets o/n.

There are no economic reports in the U.S. today however the European Commission releases Flash Consumer Confidence data for February (10:00 a.m. ET) and given the recent string of underwhelming EU data points, another bad number could weigh on EU (and to a lesser extend U.S.) stocks into the European close.

The big event today will be the release of the January FOMC Meeting Minutes at 2:00 p.m. ET. Investors will be looking for any further clues as to the Fed’s plans for the balance sheet as a dovish adjustment is one of the few potentially bullish catalysts left for this stock rally right now.

Other than the Fed, U.S.-China trade negotiations continue in Washington however a deal is largely priced in and the talks are now a risk to the market as any “bad news” regarding the trade war would likely hit stocks hard.

Is a Fed “Pause” Actually Good for Stocks?

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What’s in Today’s Report:

  • Is a Fed “Pause” Actually Good for Stocks?

Futures are decidedly higher after Congress reached a deal to avert another government shutdown late yesterday and investors remain optimistic about trade talks between the US and China as negotiations in Beijing continue this week.

The NFIB Small Business Optimism Index fell to 101.2 vs. (E) 103 in January underscoring business owners’ uncertain outlook on the economy.

Today, there is one economic report: December JOLTS (E: 6.950M) and several Fed speakers to watch: Powell (12:45 p.m. ET), George (5:30 p.m. ET), and Mester (6:30 p.m. ET).

As long as Powell does not change his recent narrative when he speaks over the lunch hour, investors will likely remain focused on additional updates regarding the new funding deal lawmakers agreed to late Monday and more importantly, the ongoing trade talks in Beijing.